Babst Calland is a member of the Smart Electric Power Alliance (SEPA). An educational non-profit association within the electric power industry, SEPA facilitates education, research, standards and collaboration with utilities, solution providers, and other energy industry leaders.
Babst Calland is a member of the Energy Bar Association (EBA), an international, non-profit association established in 1946 to advance the professional excellence of those engaged in energy law, regulation and policy through professional education, exploring diverse viewpoints and building connections.
The EBA is a dynamic organization of attorney, energy professionals, students and academia interested in all facets of the practice of energy law. EBA’s mission to promote professional excellence and ethical integrity of its member in the practice, administration, and development of energy laws, regulations, and policies.
The Legal Intelligencer
(by James Miller and Benjamin Wright)
The recent decision in STI Oilfield Services v. The Williams Companies, Inc. f/k/a Access Midstream Partners, No. 2018-1003 C.P. (Pa. Com. Pl., Susquehanna County, March 16, 2020 Opinion), highlights the challenges those in the construction industry face when contractors or subcontractors seek additional compensation based upon an alleged oral change order or modification, even when the underlying contract contains a clear “no oral modification” (NOM) clause.
Most construction contracts contain one or more NOM clauses, including a requirement that valid change orders be in writing. Generally, these clauses provide that a contract cannot be modified absent a writing executed by the parties. This is intended to avoid having the carefully drafted written agreement of the parties set aside based on alleged oral conversations that are often supported only by memory or by piecing together evidence of conduct of the parties. Oral modifications naturally breed disagreements, misunderstandings and protracted litigation—everything a well-written contract seeks to avoid. However, Pennsylvania courts have not strictly enforced NOM clauses, especially with respect to construction contracts and alleged oral change orders for extra work.
In Universal Builders v. Moon Motor Lodge, 244 A.2d 10, 15 (Pa. 1968) the Pennsylvania Supreme Court held that, outside of a contract subject to the statute of frauds, a written “contract can be modified orally although it provides that it can be modified only in writing.” “Construction contracts typically provide that the builder will not be paid for extra work unless it is done pursuant to a written change order, yet courts frequently hold that owners must pay for extra work done at their oral direction.” “The effectiveness of a nonwritten modification in spite of a contract condition that the modifications must be written depends upon whether enforcement of the condition is or is not barred by equitable considerations, not upon the technicality of whether the condition was or was not expressly and separately waived before the non-written modification.”
Courts have significant discretion in determining whether to allow oral modification claims to survive dispositive motions and move to trial. When exercising that discretion, courts look to multiple equitable factors including estoppel, the “waiver of the [NOM] or the existence of some sort of fraud, mistake, accident or reliance.” See Delaware River Port Authority v. Thornburgh, 585 A.2d 1123, 1128 (Pa. Commw. Ct. 1989) (citing Universal Builders, 244 A.2d at 16). The evidentiary standard generally required for proving oral modification of a written agreement is “clear and convincing evidence,” but the protection this higher standard offers to contracting parties who do not believe an oral modification occurred often arrives too late, at trial after incurring significant litigation costs.
In Somerset Community Hospital v. Allan B. Mitchell & Associates, 685 A.2d 141, 146 (Pa. Super. Ct. 1996), the Superior Court was presented with the issue of whether an architect who performed design work for a hospital was entitled to seek additional fees for its alleged increased scope of work based upon oral agreements with the hospital, even where the underlying contract contained an NOM clause. The court determined that “an agreement that prohibits nonwritten modification may be modified by subsequent oral agreement if the parties’ conduct clearly shows the intent to waive the requirement that the amendments be made in writing,” (citing Accu-Weather v. Prospect Communications, 644 A.2d 1251 (Pa. Super. Ct. 1994)). Specifically, the court looked to the parties’ conduct and determined that the parties’ representatives’ actions effectively waived the no-written modification clause of the contract.
In James v. N. Allegheny School District, 938 A.2d 474, 487 (Pa. Commw. Ct. 2007), the Pennsylvania Commonwealth Court held that a contractor could recover its costs for extra work even though it did not comply with the NOM clause and written notice provisions contained in the contract. In making its decision, the court considered similar factors to those in Somerset Community Hospital, Delaware River and Universal Builders.These included that the owner’s representative orally directed the extra work; the owner had knowledge the work was performed and the associated costs; the contractor submitted written documentation of the extra work after it was performed; and the owner was not materially prejudiced by the late notice of the extra work claim. Thus, based on those factors, the court concluded, “Owner, having directed contractor to perform the additional work asserting it was required by contract, cannot now disavow liability for costs incurred by claiming Contractor did not have written authorization,” (citing A.G. Cullen Construction v. State System of Higher Education, 898 A.2d 1145, 1171 (Pa. Commw. Ct. 2006) and Derry Township School District v. Suburban Roofing, 517 A.2d 225 (Pa. Commw. Ct. 1986)).
In STI Oilfield, the court addressed these legal issues in the context of written contracts between the project owner and contractor for four pipeline construction projects. After the projects were substantially completed, the contractor notified the owner of change order claims totaling almost double the aggregate original contract price. STI Oilfield, No. 2018-1003 C.P., p. 9 (March 16, 2020 Opinion).
None of the contractor’s claims complied with contract provisions regarding notice, written change order procedures or the general NOM clause. In many instances, the alleged extra work at issue occurred months prior to the owner receiving notice of the claim. The most significant claim was based on alleged oral agreements made prior to entering the contract and during its performance that purportedly required the owner to compensate the contractor for additional costs due to adverse weather conditions. This alleged oral agreement directly contradicted the written contract terms, which expressly provided the contractor was not entitled to additional compensation due to weather. The other claims largely involved more standard allegations of extra work, such as removal of rock from the right-of-way, preparation for a hurricane, and additional labor and materials to comply with an updated winter work specification.
Judge Jason Legg of the Susquehanna County Common Pleas Court granted partial summary judgment on the most significant change order claim regarding adverse weather costs. Citing Nicolella v. Palmer, 248 A.2d 20, 23 (Pa. 1968) and persuasive authority of Smith v. Phillips Pipe Line, 128 F.Supp. 61 (N.D. Okla. 1955), Legg found the parol evidence rule barred evidence of alleged pre-contract oral agreements concerning extra compensation due to weather. The court further held the claims related to the alleged post-contract oral agreement regarding weather costs failed because the contract language precluding additional compensation due to weather prevented any finding that the cost overruns could constitute extra work. The court further reasoned that even if the alleged subsequent oral modifications occurred, they were unenforceable due to lack of consideration since adverse weather was included in the original scope of the contract. The court held that performance of a preexisting contractual duty cannot constitute consideration for a contract modification.
However, Legg refused to dismiss the contractor’s other claims for alleged out-of-scope work. Legg followed an earlier decision in the case that relied on the reasoning of James and related precedent in allowing the claims to survive summary judgment and move to trial. The court that held noncompliance with the NOM clause and written change order provisions was not sufficient to dismiss the claims as a matter of law because questions of fact existed as to whether the contractor was directed to perform extra work and whether noncompliance with the contract caused prejudice to the owner. Thus, despite the existence of NOM provisions, the court found the contractor’s testimony of an oral agreement and performance of the work was sufficient to avoid summary judgment.
When drafting construction contracts, parties should keep these cases in mind and seek to craft provisions that go beyond the standard NOM clause or written change order provision to avoid disputes and protracted litigation regarding oral modification. The potential options are limited only by the parties’ creativity and circumstances of the transaction. The following are a few provisions to consider: requiring the contractor/subcontractor deliver advance written notice of the extra work to specific nonfield personnel as a condition precedent to authority to perform the work; making a signed written change order an express condition precedent to authority to perform extra work and receive payment; defining the personnel who have authority, and the extent of their authority, to modify the contract or order extra work; express language that the parties agree failure to comply with the change order provisions will cause material prejudice, and perhaps even listing the reasons why; defining the necessary evidentiary support that must be submitted with a change order, including tracking extra work costs; identifying a definite claim deadline upon which a party forfeits or waives a claim; and utilizing broad claim waiver forms the contractor/subcontractor must submit with each pay application, including progress payments and final payment, as a condition precedent to payment. These contractual tactics may not eliminate the risk posed by claims of oral modification, but they serve to encourage timely submission of legitimate claims, discourage the fabrication of oral change order claims, and promote the early resolution of claims if litigation ensues.
For the full article, click here.
Reprinted with permission from the July 2, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
Oversupply and pandemic bring on need to adapt to a changing market
Babst Calland today published its 10th annual energy industry report: The 2020 Babst Calland Report – The U.S. Oil & Gas Industry: Federal, State, Local Challenges & Opportunities; Legal and Regulatory Perspective for Producers and Midstream Operators.
In this Report more than 50 energy attorneys provide perspective on the current state of the U.S. natural gas and oil production industry and its growth to historic highs due to more than a decade of advances in on-shore horizontal drilling and high-volume hydraulic fracturing. It asserts that despite current challenges, a maturing shale industry is poised for future growth as natural gas and oil producers have driven down the costs of production. Transportation options for moving these natural resources from growing areas of production to customers continue to be built, even with new hurdles from regulators and other stakeholders.
Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “The U.S. natural gas and oil industry has experienced tremendous growth and change since we first published this Report in 2011. Fast forward to an unprecedented 2020 with a pandemic, a corresponding economic slow-down and oversupply of natural gas and crude oil. With increased public and government pressure, sustained low prices, and less-reliable financing options, resiliency will continue to be the driving force of a dynamic energy market that continues to evolve.”
Report highlights
The Babst Calland Report is an annual review of the issues and trends at the federal, state and local level in the oil and gas industry over the past year. The 102-page Report covers a range of topics from the industry’s business outlook, regulatory enforcement and rulemaking to developments in pipeline safety and litigation trends. The Firm’s collective legal experience and perspectives on these and related business developments are highlighted in this Report, including those summarized below:
The natural gas and oil industry continues to expand its reach and impact on U.S. energy supply and independence. Each company has its own set of opportunities and challenges to navigate based on its financing, debt, shareholder goals, and operations and infrastructure footprint. Nonetheless, the United States’ plentiful supply of natural gas and oil is expected to continue to fuel the country’s economic future and support national security.
Request a copy of the Report
Babst Calland’s Energy and Natural Resources attorneys support clients operating in multiple locations throughout the nation’s shale plays. To request a copy of the Report, contact info@babstcalland.com.
Smart Business
(by Adam Burroughs with Molly Meacham)
As states begin to relax restrictions on social gatherings, businesses are trying to reopen in a manner that is safe for their employees, vendors, customers and clients. They’re also trying insulate themselves from the legal exposures they face as they work out a plan to get their business up and running.
“I’m getting a lot of questions from employers who want to do right on all of those fronts,” says Molly Meacham, a shareholder at Babst Calland. “They are really working hard, thinking through the issues, listening to state, local and federal government advice, all while trying to keep their businesses running.”
Smart Business spoke with Meacham about addressing the legal risks that come with operating during the pandemic.
What legal concerns do companies have as they reopen?
The most significant concern is that a company will have an outbreak at their workplace. If that happens, it means considering the company benefits employees should be entitled to, such as sick leave or short-term disability, if they are eligible for leave under the Family and Medical Leave Act (FMLA), if they are covered by Families First Coronavirus Response Act (FFCRA) and eligible for those leaves, or if they’re entitled to any accommodation under the Americans with Disabilities Act.
Another risk is that contracting the illness could lead to a lawsuit or workers’ compensation claim. In a classic workers’ compensation scenario, the employee would need to prove they contracted the virus at the workplace. Some states are reducing employees’ burden of proof, or covering COVID-19 illness for certain groups of employees. For those states that are not making changes, whether or not COVID-19 is covered by workers’ compensation is likely to be a hotly litigated issue.
The regulatory and legal burden on employers has increased dramatically with this pandemic. For example, the Department of Labor has hired a number of new Wage and Hour Division investigators to enforce wage and hour laws, including the new FFCRA. The increased regulatory burden and increased enforcement could lead to administrative action or civil liability for companies found to be in violation.
How can companies reduce their litigation exposure?
Some companies are looking at COVID-19 exposure liability waivers to provide some legal insulation. Those waivers are of limited utility against employee claims, as an employer typically cannot compel employees to waive future rights, their rights under workers’ compensation, or their right to make an OSHA complaint for an unsafe workplace. Therefore, employee waivers are likely to generate bad will and skepticism without much return.
The effectiveness and enforceability of waivers for customers, clients and third parties who are accessing a company’s premises depends on state law and the specifics of the waiver. Although those waivers may ultimately be enforceable in certain states, for some businesses the limited potential legal protection may be outweighed by the negative impact on the company’s business relationships. In addition, in some states those waivers may ultimately be unnecessary, as some states are passing legislation granting businesses immunity from liability for harm caused by COVID-19.
How can companies keep people safe and insulate themselves from legal repercussions?
It’s important to have a response plan in place. If there’s an incident or exposure in the workplace, the company should first care for the impacted employee, then ensure that other potentially impacted employees are promptly notified and removed from the workplace if necessary, and that steps are taken to disinfect the workplace.
For companies that have a plan in place that is compliant with federal, state and local guidelines and regulations, and the company clearly communicated that plan to employees and customers, it will be difficult for a court to second-guess those steps and say that a company should have done more.
These are difficult times. Through preparation, companies can balance safety with continued operations and maintain the safest possible premises for employees and third parties, such as vendors, customers and clients.
For the full article, click here.
For the PDF, click here.
The PIOGA Press
(by Lisa Bruderly and Ben Clapp)
On May 28, the Ninth Circuit denied the U.S. Army Corps of Engineers’ request for an emergency stay pending appeal of a Montana district court’s vacatur of Nationwide Permit (NWP) 12 in Northern Plains Resource Council, et al. v. Army Corps of Engineers, a challenge to the Keystone XL Pipeline. As a result of the denial, NWP 12 remains unavailable for the construction of new oil and gas pipelines. The ruling means continued permitting delays are likely for pipeline developers seeking federal authorization for stream and wetland crossings and any resulting discharge of dredged or fill material into waters of the United States under Section 404 of the Clean Water Act (CWA).
A Montana district court’s April vacatur of NWP 12 was based on the judge’s determination that the Corps failed to comply with the Endangered Species Act (ESA) when NWP 12 was last issued in 2017. The decision was interpreted as a broad vacatur of NWP 12, extending beyond permitting of the Keystone XL Pipeline. In a significant positive development for permittees proposing work on existing pipelines, on May 11 the district court narrowed the scope of its original vacatur “to the construction of new oil and gas pipelines” with NWP 12 remaining “in place during remand insofar as it authorizes non-pipeline construction activities and routine maintenance, inspection, and repair activities on existing NWP 12 projects.”
For pipeline developers, however, the stay sought by the Corps represented the final possibility of continuing to conduct work under NWP 12 during the long appellate process. The Ninth Circuit denied the Corps’ request on grounds that the Corps had not demonstrated a likelihood of success on the merits or probability of irreparable harm if the stay was not granted.
The likely consequences of the denial are significant to pipeline developers and the producers that may have been relying on the construction of certain infrastructure. The ruling increases the possibility that construction windows will be missed for this year, resulting in potential cost overruns and liabilities for failure to meet construction milestones.
Until this matter is resolved judicially or the Corps issues a new NWP 12 consistent with the Montana district court’s remand, pipeline developers will likely need to apply for an individual Section 404 permit to proceed with stream and wetland crossings, generally a far more costly and time-consuming process than receiving authorization to work under an NWP. The timeframes for processing individual permit approvals may be further extended due to a likely influx of applications for projects that can no longer use NWP 12. Another option may be seeking coverage under a different NWP, if applicable.
The PIOGA Press
(by Mike Winek, Gary Steinbauer and Gina Falaschi)
Pennsylvania’s Environmental Quality Board (EQB) published a proposed rulemaking in the May 23 Pennsylvania Bulletin entitled “Control of VOC Emissions from Oil and Natural Gas Sources.” 50 Pa.B. 2633 (www.pacodeandbulletin.gov/ Display/pabull?file=/ secure/pabulletin/data/ vol50/50- 21/684.html). This proposed rulemaking would have Pennsylvania adopt reasonably available control technology (RACT) requirements and RACT emission limitations for existing oil and natural gas sources of volatile organic compound (VOC) emissions.
As proposed, the rule would apply to owners and operators of any of the following oil and natural gas sources of VOC emissions that were in existence on or before the effective date of this rulemaking: storage vessels (in all segments except natural gas distribution), natural gas-driven pneumatic controllers, natural gas-driven diaphragm pumps, centrifugal compressors and reciprocating compressors, and fugitive emission components.
This proposal is based on EPA’s October 2016 Control Techniques Guidelines (CTG) for the Oil and Gas Industry, which provide RACT requirements for VOC emissions from existing oil and gas sources. Pursuant to the federal Clean Air Act, EPA established National Ambient Air Quality Standards (NAAQS) for six “criteria pollutants,” which includes ground-level ozone. Ground level ozone is created in a photochemical reaction of oxides of nitrogen (another criteria pollutant) and VOCs in the presence of sunlight.
The federal statute requires any (i) existing major source of VOC emissions (generally more than 50 tons per year of VOC depending on location) in an ozone nonattainment area and (ii) any other source (i.e., minor sources) for which EPA has issued a CTG to implement RACT to control emissions, consistent with the issued CTG. Pennsylvania is in the northeast ozone transport region, which makes the Commonwealth nonattainment for ozone, and thus triggers RACT under federal law.
The Clean Air Act requires states to revise their State Implementation Plans to include RACT for sources of VOC emissions covered by a CTG issued by the U.S. Environmental Protection Agency. The EPA proposed withdrawing the CTG in March 2018 but has not yet taken final action; Pennsylvania has continued to develop this rulemaking to meet the CTG implementation deadline of January 2021.
Despite the potential rollback of the CTG and other federal regulations by EPA, the Pennsylvania Department of Environmental Protection explained that it moved forward with this proposed rulemaking because:
These requirements are consistent with the leak detection and repair (LDAR) inspection requirements specified in DEP’s General Plan Approval and General Operating Permit for Natural Gas Compression Stations, Processing Plants and Transmission Stations (GP-5); the General Plan Approval and General Operating Permit for Unconventional Natural Gas Well Site Operations and Remote Pigging Stations (GP-5A); and the Air Quality Permit Exemptions, Exemption 38. EQB’s May 23 proposal also notes that the rulemaking is consistent with Governor Tom Wolf’s strategy to reduce methane from the oil and natural gas industry because, while this rulemaking focuses on the reduction of VOC emissions, methane emissions would also be reduced as a co-benefit since both VOCs and methane are emitted from oil and gas operations.
EQB is accepting written comments regarding this proposed rulemaking until July 27. Additionally, EQB will hold three virtual public hearings regarding the proposed rulemaking on June 23, 24 and 25
The Legal Intelligencer
(by Anna Skipper and Krista Staley)
For over 100 years, local governments have used zoning regulations, enabled by the police powers delegated from the states, to implement plans for the development of their communities. For just as long, objectors have challenged zoning regulations as exceeding this authority. The Commonwealth Court recently upheld such a challenge in Allen Distribution v. West Pennsboro Township Zoning Hearing Board, No 524 C.D. 2019 (Pa. Commw. Ct. May 11, 2020), finding that West Pennsboro’s decision to change the zoning of two parcels constituted illegal spot zoning.
Zoning ordinances generally enjoy a presumption of constitutional validity. However, an ordinance will be held to be unconstitutional if it is unreasonable, arbitrary or not substantially related to the police power interest it purports to serve. Thus, zoning enabling acts, such as the Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq. (the MPC), require all zoning measures to be substantially related to the protection and preservation of the public health, safety, morality and welfare interests of its community.
Zoning regulations consist of a zoning map and zoning text. Those documents work in tandem; the map divides the municipality, or municipalities in cases of joint zoning, into “districts” while the text provides regulations for each district, imposes requirements for specific uses and outlines various procedures. Under the MPC, either the municipality or a landowner (including a leaseholder or potential buyer) can propose text and map amendments. The amendment process allows municipalities to improve their ordinances by, for example, adapting them to accommodate new and evolving uses. However, when used in a piecemeal fashion to achieve inconsistent goals, amendments may no longer have a reasonable relationship to the police power they must promote.
Objectors who believe a map or text amendment does not relate sufficiently to the police power can file a substantive validity challenge asserting the illegality of the ordinance. The local zoning hearing board, a quasi-judicial board appointed by the local governing body and required in any municipality with zoning, has jurisdiction to hear and decide substantive validity challenges to zoning ordinances. A zoning hearing board decision is appealable to the Common Pleas Court, and then the Commonwealth Court. Further appeal requires the Pennsylvania Supreme Court to grant an allowance of appeal. When engaged in appellate review of a zoning hearing board determination, the appellate court’s scope of review is typically limited to determining whether the board committed an error of law or a manifest abuse of discretion. Reversible error occurs where the zoning hearing board’s findings are not supported by substantial evidence. If the trial court has reason to take additional evidence, it will decide the appeal de novo.
In Allen Distribution v. West Pennsboro Township Zoning Hearing Board, the Commonwealth Court grappled with a substantive validity challenge alleging that a zoning map amendment constituted “spot zoning.” Spot zoning occurs where a parcel is singled out for different treatment than that accorded to similar surrounding land, creating an “island” on the zoning map. Spot zoning may occur organically and innocently through the zoning amendment process, or it may be the result of intentional rezoning of an area for the economic benefit or detriment of a landowner. In either instance, if there was no reasonable basis for the different treatment of the “island,” a challenged zoning ordinance will be stricken as unconstitutional and invalid.
The Allen Distribution v. West Pennsboro Township Zoning Hearing Board case considered the substantive validity of two ordinances amending the West Pennsboro Township (the township) zoning map. The amendments rezoned two large adjacent parcels, totaling 133 acres of land (the property), in anticipation of its sale and development. Allen Distribution, the proposed purchaser and equitable owner of both parcels, applied to the Township Board of Supervisors (the supervisors) to rezone the parcels from “high density residential” to “industrial.” Allen intended to construct industrial buildings on the property. Following public hearings, the Supervisors enacted two identical ordinances (the ordinances) rezoning the land as requested. Neighboring property owners (the objectors) subsequently challenged the substantive validity of both ordinances before the Township Zoning Hearing Board (the board). The board concluded that the objectors sustained their burden of establishing that the ordinances “unjustifiably, arbitrarily, and unreasonably single out land for different treatment than from that accorded to similar surrounding land of the same character for the economic benefit of Allen,” and therefore constituted invalid spot zoning.
Allen appealed to the Common Pleas Court, which affirmed the board’s decision, and Allen again appealed. While Allen did not challenge the board’s determination that the property was being treated differently, or that the property is similar in character to the adjoining properties, it attempted to show that there was reasonable basis for the different treatment, rendering the ordinances a valid exercise of the police power. Allen primarily argued that the large size of the lot, the nature of certain nearby uses, and the fact that the joint comprehensive plan of the township identified the property as a future industrial growth area created a reasonable basis for the different treatment of the property by the supervisors.
The Commonwealth Court engaged in an in-depth discussion of each argument and concluded that there was no error or abuse of discretion in the board’s determination, i.e., that there was no reasonable basis for the different treatment of the property, and the ordinances constituted invalid spot zoning as they unjustifiably, arbitrarily, and unreasonably singled out the property for treatment different than similar surrounding land of the same character for the economic benefit of Allen.
The court first addressed the large size of the property, which it considered a single integrated unit despite the fact that it was, at that time, two separate lots with legal title held by two separate owners. As the court noted, while spot zoning often is found in regards to relatively small parcels, the size of the property is only one factor in determining whether spot zoning has occurred. The main inquiries are whether the land at issue is a single, integrated unit and whether any difference in its zoning from that of adjoining properties can be justified with reference to the characteristics of the tract and its environs. The court concluded that there was no error or abuse of discretion in the board’s determination that the property was a single integrated unit. Therefore, the court dismissed Allen’s argument that the property’s size, in relation to the small size of the adjacent lots and the large size of other industrial-zoned properties in the vicinity, rendered it sufficiently different to warrant differential treatment.
Turning next to its comparison to the surrounding uses, the court noted that properties bordering the property in the township were generally zoned R-2, with the Pennsylvania Turnpike and the neighboring township abutting the remaining borders. Allen argued that the property’s proximity to an area of infrastructure and development, namely parcels located in the adjacent North Middleton Township that did not directly abut the property, justified the rezoning. Relying on Schubach v. Zoning Board of Adjustment (Philadelphia), 270 A.2d 397 (Pa. 1970), the court held that even if the Property rested on the border of industrial-zoned land, it would not automatically justify rezoning it to match. In addition, it noted that it could not “attribute more significance to the use of more distant properties than those properties adjacent to the subject property,” and that “spot zoning would have nothing to do with a spot or an island if the use of nonadjacent properties was more relevant than the adjacent properties.”
Moving on, the court addressed Allen’s argument that the rezoning’s consistency with the township Comprehensive Plan justified the change. Allen pointed to the identification of 31 parcels in the vicinity, including the Property, as “future industrial growth areas” on the comprehensive plan map. However, the township did not rezone any of the other referenced parcels in accordance with the map. Thus, while the rezoning of the property was consistent with the comprehensive plan map as it applied to the property, the court found it was not consistent as it applied to the area as a whole. Turning to the comprehensive plan text, the court noted the document’s acknowledgement of the need for “proper transition between uses as conflicts may arise in some circumstances between neighboring properties.” The court reviewed Schubach v. Silver, 336 A.2d 328, 338 (Pa. 1975) (Schubach II), where the Pennsylvania Supreme Court upheld a rezoning after finding the change creating a “transition zone” and represented the “best buffer” consistent with the comprehensive plan. The court distinguished Schubach II from the case before it on the facts, upholding the board’s determination that rezoning the property did not establish a land use that “best blends in with surrounding different uses.” According to the court, there were “significant differences” between the property and the adjoining parcels zoned R-2.
The court similarly dispensed with Allen’s additional arguments, holding that although “various government entities voted to recommend rezoning in conjunction with their review of the comprehensive plans” and “rezoning will create some benefit to persons other than the owner,” there was still no justifiable reason for treating the property differently than those that surrounded it.
Ultimately, the court found that substantial evidence supported the board’s determination that the rezoning did not promote the health, safety and welfare of the township residents, and therefore there was no error or abuse of discretion in the determination that the ordinances unjustifiably, arbitrarily, and unreasonably singled-out land for treatment different than similar surrounding land of the same character for the economic benefit of Allen, rendering the ordinances invalid as spot zoning.
For the full article, click here.
Reprinted with permission from the June 17, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
Energy Alert
(by Robert Stonestreet and Jim Curry)
The United States Forest Service may grant permission for a natural gas pipeline to go underneath the Appalachian Trail, so says the United States Supreme Court in an opinion released on June 15, 2020. Seven of the nine justices voted to reverse a decision by the Fourth Circuit Court of Appeals that had concluded the Forest Service lacked authority to do so for the Atlantic Coast Pipeline (ACP). Only Justice Sonia Sotomayor and Justice Elena Kagan dissented from the decision.
The ACP is a proposed 604-mile pipeline stretching from West Virginia to North Carolina. Approximately 16 miles of the pipeline route goes through the George Washington National Forest, which requires approval from the Forest Service. The Appalachian Trail, a 2,200-mile federally designated footpath from Mount Katahdin in Maine to Springer Mountain in Georgia, also passes through the George Washington National Forest with permission from the Forest Service. The National Park Service administers the Appalachian Trail through various arrangements with the Forest Service. At issue in this case is a 0.1-mile segment of the pipeline that would pass under the Appalachian Trail at a depth of approximately 600 feet. Both the entry and exit locations for this segment of the pipeline would be on private land, would not be visible from the Appalachian Trail, and would not disturb the surface of the trail.
In 2018, the ACP developers obtained the necessary authorizations from the Forest Service to place the pipeline through the National Forest and under the Appalachian Trail. Several organizations challenged these authorizations by arguing that the Forest Service lacked authority to authorize a pipeline to cross under the trail. The Fourth Circuit agreed and vacated the authorizations issued by the Forest Service.
In an opinion by Justice Clarence Thomas, the Court concluded that the various statutes and regulations governing the Appalachian Trail and other national trail systems effectively created a means to establish a right-of-way for the trails to cross National Forest land and other lands. Those statutes and regulations did not, however, effectively convey the land traversed by the trail to the National Park Service or otherwise restrict the Forest Service’s statutory authority to grant rights-of-way to cross the trail. The Court rejected the notion that arrangements between the Forest Service and the National Park Service for maintenance and administration of the Appalachian Trail had effectively converted the trail into lands within the National Park system, which would place them beyond the Forest Service’s authority. Instead, the Court found that the trail enjoyed the benefit of a right-of-way easement through the National Forest while the underlying land is still controlled by the Forest Service. With most easements, the recipient receives rights to use land for a particular purpose, such as to install utility lines or cross into adjacent property. The recipient of an easement typically does not receive ownership or control over how the land is otherwise used. While the National Park Service received easement rights from the Forest Service for the Appalachian Trail, the land traversed by the trail remains under the jurisdiction of the Forest Service. The Forest Service may thus authorize others to cross under the trail. Although not noted in the Court’s opinion, more than 50 other pipelines have obtained easements to cross under the Appalachian Trail and do not interfere with the public’s use of the trail. As Justice Thomas aptly noted: “Sometimes a complicated regulatory scheme may cause us to miss the forest for the trees, but at bottom, these cases boil down to a simple proposition: A trail is a trail, and land is land.”
The Court also observed that portions of the Appalachian Trail crosses lands owned by states, local governments, and private landowners under the authority of easements obtained from those landowners. Under the reasoning adopted by the Fourth Circuit, those portions of the Appalachian Trail, as well as 20 other national trails administered by the National Park Service, could be considered lands controlled by the National Park Service. Such a determination would subject these non-federal lands to all the restrictions and limitations that accompany property governed by the National Park Service, which is something likely not contemplated by the property owners when granting an easement for the trails. As this case illustrates, such a designation could severely restrict the landowners’ ability to grant other easements or otherwise use their property.
If you have any questions about the Court’s decision or its implications, please contact Robert M. Stonestreet at 681.265.1364 or rstonestreet@babstcalland.com or James Curry at 202.853.3461 or jcurry@babstcalland.com.
EmTech Law Blog
(by Justine Kasznica)
An artist’s rendering of NASA’s VIPER rover, which will roam the Moon’s south pole looking for water ice.
(Source: NASA)
Today, we are thrilled to celebrate with Astrobotic Technology, Inc., a Pittsburgh-based space robotics and lunar transportation and logistics company, on receiving a $199.5 NASA award to send the NASA Volatiles Investigating Polar Exploration Rover (VIPER) to the lunar surface in 2023 to search for water-ice. Not only is this a historically significant mission, as it is the first “resource-mapping” mission of its kind, this is an amazing achievement for a company that that has worked tirelessly for 13 years to prove a new commercial space market. For more information, click here.
Our Emerging Technologies attorneys are fortunate to work with incredible innovators, entrepreneurs and visionaries pushing the frontiers of technology and industry. We love to showcase our clients, especially when they hit notable milestones that may be of interest to our entire Babst Calland EmTech family.
Our newly launched EmTech Blog will enable us to do more of these Client Spotlights, so stay tuned! If you would like your company to be featured, please send accomplishments or highlights to jkasznica@babstcalland.com.
Tags: Emerging Technology, Industry News, Innovation, NASA, Robotics, Technology
The Legal Intelligencer
(by Lisa Bruderly and Daniel Hido)
The Pennsylvania Department of Environmental Protection (PADEP) is proposing significant revisions to its regulations and guidance regarding the permitting of obstructions and encroachments of waters of the commonwealth under 25 Pa. Code Chapter 105. The regulatory revisions, if promulgated, are expected to significantly change the Chapter 105 permitting process by increasing the level of required effort to complete an individual (joint) permit application and potentially increasing the time for the PADEP to review such applications.
The PADEP has presented the regulations and guidance to several of its advisory committees, including, most recently, the Water Resources Advisory Committee (WRAC) on May 28. Later this year, the proposed revisions are expected to be presented to the Environmental Quality Board, with a public comment period to follow. The PADEP’s “draft final” technical guidance document (TGD) on alternatives analysis requirements is expected to be finalized and published in coordination with the proposed regulatory revisions.
Proposed Regulatory Changes to Chapter 105
Proposed revisions to Chapter 105 include the following:
Permit Waivers—Addition of six new permit waivers to 25 Pa. Code Section 105.12, including new waivers for temporary environmental investigation activities and for temporary mats and pads used to minimize erosion and sedimentation at wetland crossings.
Alternatives Analysis—Addition of criteria to the alternatives analysis requirements at 25 Pa. Code Section 105.13(e)(viii), including identification of the effects of “reasonably foreseeable future development” within the wetland or watercourse upstream and immediately downstream of the proposed project and demonstration that project alternatives impacting other regulated waters would meet the requirements of 25 Pa. Code Section 105.16, regarding environmental, social and economic balancing.
Impacts Analysis—Addition of requirements for impacts analyses under 25 Pa. Code Section 105.13(e)(x), including detailed analysis of the “potential secondary impacts” (undefined) of a proposed project on an expanded list of resources, including public water supplies, natural areas, areas or structures of cultural significance, parks, recreational areas, historical sites and certain designated streams.
Projects would also require a “narrative discussion and analysis” on water dependency. Projects affecting a wetland would require a narrative discussion of the wetland delineation process, an analysis of whether a wetland is exceptional value, and a demonstration that the requirements for permitting structures or activities in wetlands under 25 Pa. Code Section 105.18a have been met.
Antidegradation—Addition of a requirement under 25 Pa. Code Section 105.13(e)(xii) to demonstrate that the proposed project is consistent with antidegradation requirements under applicable Pennsylvania regulations and the Clean Water Act.
Cumulative Impacts—Addition of a requirement under 25 Pa. Code Section 105.13(e)(xiii) to perform a “projectwide cumulative wetland impact analysis,” including a demonstration that the proposed project does not result in an impairment of wetland resources or major impairment of the wetlands under 25 Pa. Code Section 105.18a.
Environmental Assessment for Aquatic Resource Restoration—Creation of new PADEP criteria to evaluate environmental assessments of projects involving aquatic resource restoration under 25 Pa. Code Section 105.15(a)(4), including consideration of the project’s goals and objectives, wetland delineation and watercourse reports, the resource type and uses, historic and modern land uses, the anticipated aquatic resource restoration improvement and benefit, and various geomorphic, geologic and geotechnical information.
Compensatory Mitigation—Replacement of existing wetland mitigation criteria under 25 Pa. Code Section 105.20a with more expansive provisions applying to all regulated waters of the commonwealth. Rather than specific ratios, compensatory mitigation for unavoidable impacts would require “replacing the resource functions that will be impacted” or providing substitute resources. The amount of compensatory mitigation would be determined by the PADEP based on new criteria, including the direct, indirect and secondary impacts of the project and the value of the proposed mitigation actions to “reestablish and rehabilitate environmental resources.”
The PADEP would also be required to “track wetland losses and gains” occurring through Chapter 105, with the goal of ensuring “no net loss of wetland resources within the service areas.” Although “service areas” are not defined, compensatory mitigation could be achieved through a PADEP-approved mitigation bank, in-lieu fee program or permittee responsible mitigation site, so long as the mitigation site is located within the same state water plan sub-basin as the project impacts or within the designated watershed boundaries identified by the PADEP.
Draft Final Guidance Regarding Chapter 105 Alternatives Analysis
Among other information, the 21-page Chapter 105 Alternatives Analysis TGD provides an overview of the alternatives analysis process and a template checklist of the items the PADEP expects to be submitted as part of the alternatives analysis demonstration. Example tables for the submittal of information are also provided. The PADEP has indicated that the TGD may be issued for public comment in the second half of 2020. A trenchless technology TGD has also been drafted and is expected to be finalized with the alternatives analysis TGD.
Key Takeaways
The proposed revisions would create expansive new requirements, almost certainly increasing the time and effort required to complete individual/joint Chapter 105 permit applications. These new requirements, if promulgated, will also likely increase PADEP application review times, particularly at the outset when the agency and the regulated community are becoming familiar with the new requirements. Additionally, revised compensatory mitigation criteria could expand the extent of mitigation required for a project. On the other hand, the addition of six new permit waivers means that certain projects may no longer be required to obtain a Chapter 105 permit.
For the full article, click here.
Reprinted with permission from the June 11, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
Emerging Technologies in a Time of Pandemic
(by Ben Clapp, Julie Domike, Gina Falaschi, Justine Kasznica and Boyd Stephenson)
On May 1st, Amazon Prime premiered Upload, the story of a software engineer whose consciousness is transferred to the cloud after his fully autonomous vehicle (AV) rear-ends another car. The accident takes place in 2033. By then, the show imagines, vehicles that drive themselves will be the default. We won’t spoil the ending. But, in the fictional 2033—only 13 years from now—the public is astounded when the vehicle is involved in a wreck. It is an entertaining take on the future. In reality, however, we’ve got a lot of regulations to update if autonomous vehicles (AVs) are going to play the role imagined in Upload.
That’s too bad, given the current state of affairs. As industry commentators have noted, in this time of pandemic AVs could have provided much needed assistance with long-haul shipments, non-contact deliveries of food and other goods, and contact-free transportation of the sick or elderly to and from medical appointments. Some have predicted that the benefits AVs provide during public health crises will help propel them to wider acceptance and regulatory approval. And while there is still much work to be done on that front, there is a solid foundation to build on.
Pipeline Safety Alert
(by Keith Coyle and Ashleigh Krick)
On June 9, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a Notice of Proposed Rulemaking (NPRM) proposing amendments to the gas pipeline safety regulations at 49 C.F.R. Parts 191 and 192. PHMSA explained that the purpose of the NPRM is to ease regulatory burdens identified through internal agency review, petitions for rulemaking, and public comments. The Agency estimates that the proposed amendments will result in approximately $129 to $132 million in annualized cost savings, with the largest cost savings due to amendments related to farm taps and atmospheric corrosion inspections. Comments are due August 10, 2020.
The NPRM covers the following topics:
Proposed Exemptions from the Distribution Integrity Management Program Requirements
Corrosion Control
Reporting and Information Collection
Standards Incorporated by Reference for Plastic Pipe
Test Factor for Pressure Vessels
Other Proposed Amendments
Environmental Alert
(by Lisa Bruderly and Daniel Hido)
The United States Environmental Protection Agency (USEPA) has pre-published a final rule that streamlines the water quality certification requirements under Section 401 of the Clean Water Act (CWA), 33 U.S.C. § 1341 (the 401 Rule). Section 401 requires any applicant for a federal license or permit which will, or may, result in a discharge to waters of the United States (WOTUS) to obtain a certification that the discharge will comply with applicable water quality requirements from the applicable state, authorized tribe or interstate agency (Certifying Authority).
The rulemaking, found at 40 CFR Part 121, is in response to President Donald Trump’s April 10, 2019 Executive Order 13868, which identified Section 401 as “one source of confusion and uncertainty hindering the development of energy infrastructure” and directed USEPA to update its regulations and guidance. USEPA characterizes the 401 Rule as the agency’s first “holistic” analysis of Section 401 since the 1972 Federal Water Pollution Control Act amendments (i.e., the CWA).
The 401 Rule is expected to benefit applicants for federal permits or licenses which will, or may, result in a discharge from a point source to WOTUS, including applicants seeking National Pollutant Discharge Elimination System (NPDES) and Section 404 permits, as well as hydropower and pipeline licenses issued by the Federal Energy Regulatory Commission (FERC) by (1) narrowing and streamlining the certification process, (2) limiting the scope of Certifying Authority review/response, and (3) capping the amount of time that Certifying Authorities can review a certification. The Rule comes in response to state attempts to delay natural gas pipelines and other energy-related facilities through extended Section 401 certification processes, requiring applicants to address a number of considerations unrelated to water quality, including climate change.
Key takeaways from the 401 Rule include the following:
The scope of Certifying Authority review has been significantly restricted. The 401 Rule restricts a Certifying Authority to determining whether the discharge will comply with “water quality requirements” (limited to only certain enumerated sections of the CWA or state water quality requirements for point source discharges to WOTUS) and prohibits consideration of: (1) impacts from the activity as a whole, (2) state requirements unrelated to water quality, and (3) compliance with water quality requirements for waters that are not WOTUS. This provision specifically restricts a Certifying Authority’s ability to impede projects by requesting information on climate change, “air quality or transportation concerns, public access to waters, energy policy, or other multi-media or non-water quality impacts,” or to deny certifications based on such considerations.
Appropriate responses to certification requests have been clarified. The Certifying Authority must take one of four actions in response to a certification request: (1) grant; (2) grant with conditions necessary for the discharge to meet water quality requirements; (3) deny; or (4) waive the certification requirement. If the Certifying Authority denies the request, it must identify the specific water quality requirements with which the discharge will not comply, explain why the discharge will not comply, and, if the denial is due to insufficient data or information, identify what data or information would be needed to assure the discharge will comply.
While Section 401(d) allows the Certifying Authority to grant the certification with conditions necessary for the applicant to comply with water quality requirements or “any other appropriate requirement of state law,” the 401 Rule clarifies that a Certifying Authority may only impose conditions related to state water quality requirements for point source discharges into WOTUS. In addition, when imposing such conditions, a Certifying Authority must explain why the conditions are necessary to assure the discharge will comply with water quality requirements and include a citation to the law that authorizes the condition. This provision will require Certifying Authorities to be very clear in their response to certification requests.
The time frame for review has been capped at one year. Section 401 requires the Certifying Authority to act on a certification request within a “reasonable” time not to exceed one year. The 401 Rule clarifies that the one-year limit is an absolute deadline, after which the Certifying Authority will be deemed to have waived certification. The time frame may not be tolled for any reason, including the Certifying Authority requesting the applicant to provide additional information or to withdraw and resubmit the request. However, an applicant voluntarily withdrawing and resubmitting a request restarts the time frame.
It is important to note that the required review time frame can be less than one year. Within 15 days of receiving an applicant’s request for certification, the federal permitting agency will prescribe the “reasonable” time for the Certifying Authority to act on the request by issuing one of the four decisions discussed above.
The certification will be deemed waived if the Certifying Authority: (1) does not act on the request, (2) does not issue one of the four required decisions, or (3) issues a decision that does not comply with the requirements of the 401 Rule. Imposing a one-year (or shorter) time frame for responding to certification requests will assure that the Section 401 certification process will not unnecessarily delay federal projects for extended time frames.
A meeting with the Certifying Authority must be requested prior to submitting a request for certification. The 401 Rule requires an applicant to request a meeting with the Certifying Authority a minimum of 30 days prior to submitting a request for certification. However, the Certifying Authority can decline such a request.
Next Steps
The final rule will be effective 60 days after publication in the Federal Register. NGO and state challenges to the final rule are expected.
Babst Calland’s environmental attorneys are closely monitoring this rulemaking. If you have questions about the final rule, please contact Lisa M. Bruderly at 412.394.6495 or lbruderly@babstcalland.com or Daniel P. Hido at 412.394.6580 or dhido@babstcalland.com.
The Legal Intelligencer
(by Brian Lipkin)
The Occupational Safety and Health Administration (OSHA) is the federal agency that enforces workplace safety and health rules. On May 19, OSHA issued two enforcement memos outlining its plans to inspect workplaces during the COVID-19 pandemic. These memos took effect on May 26.
As workplaces reopen, here is what employers can expect:
When employees go back to work, OSHA anticipates an influx of COVID-19-related complaints. As a result, OSHA will prioritize inspections of workplaces with “high” and “very high” risks of COVID-19 exposure, including medical facilities, nursing homes and clinical laboratories.
OSHA is less likely to visit workplaces with medium- and low-risk levels, meaning that employees have less frequent and less close contact with the public. So, retail stores and offices are unlikely to have an OSHA compliance officer pay a visit. If OSHA receives a complaint about a medium- or low-risk workplace, it will typically send a letter, ask the employer to respond in writing and close the inspection without any in-person contact.
OSHA requires all businesses to provide workers with personal protective equipment. Depending on the type of workplace, equipment to protect against COVID-19 can include masks, gloves and hand sanitizer.
Having shopped at Target recently, OSHA compliance officers understand many businesses can’t purchase these items because they are in limited supply. OSHA will use its discretion in citing employers that have acted in good faith, so employers should document their attempts to purchase any equipment that is unavailable.
If a business can’t purchase the right protective equipment, it should consider changing workplace rules to limit exposure risks. For example, capacity controls or schedule changes could limit the number of people who come close into close contact with each other.
Next, the enforcement memos suggest that businesses should consider the pros and cons of using any expired equipment they may have. As a last resort, businesses can consider improvising with the protective equipment they are able to obtain.
As part of an inspection, OSHA is likely to ask employers for written records. For example, OSHA requires all employers to conduct a “hazard assessment,” which involves deciding whether the workplace presents risks which require employees to use personal protective equipment. OSHA also requires employers to document in writing that they have done this assessment. Employers may need to update hazard assessments to take into account COVID-19 risks, and should document any changes.
Employers should also be prepared to share with OSHA any policies and training materials relating to COVID-19. When employers provide training, it is a best practice to create a sign-in sheet documenting the name and date of each employee’s session.
Finally, OSHA requires certain employers to keep an OSHA 300 Log listing work-related injuries and illnesses. (Employers with 10 or fewer employees, and employers in certain low-risk industries, are exempt from this requirement.) In deciding whether an illness is work-related, the employer must consider whether an exposure in the workplace caused or contributed to the condition. While this standard might seem straightforward, it can be difficult or impossible to identify how an employee contracts COVID-19, leading employers to be uncertain about how they should report these illnesses.
In its enforcement memos, OSHA clarifies that if an employee gets the COVID-19 virus, the employer does not need to “undertake extensive medical inquiries” to determine whether to report the illness on its OSHA 300 Log. Instead, the employer should use common sense to evaluate the most likely source of infection. For instance, if an employee does not have frequent contact with the general public, and was the only employee in the workplace with COVID-19, the transmission probably occurred outside of work, and likely would not need to be reported.
Now is the best time for employers to prepare for a potential OSHA inspection. Based on these enforcement memos, we expect OSHA to prioritize inspections of high-risk workplaces, require employers to use good faith to obtain appropriate protective equipment, and request records showing efforts to limit COVID-19 risks.
For the latest updates on OSHA’s response to COVID-19, employers can visit OSHA’s website at osha.gov/covid-19.
For the full article, click here.
Reprinted with permission from the June 4, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.